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Australia starts new capital cycle

James Quigley, Director of Capital Markets, Colliers International Australia

BIO

As National Director of Capital Markets, Institutional & International at Colliers International Australia, James Quigley focuses on sourcing and executing new business with onshore and offshore clients drawing on his experience in capital transactions and extensive knowledge of all sources of capital including wholesale, listed and private equity. He is at the forefront of identifying business opportunities with capital market clients across all asset classes including office, industrial, retail and residential.

There is at least A$20 billion (HK$160.7 billion) of purchasing capacity available now to buy core office assets across Australia, with strong interest flowing from offshore investors on to other investor groups.

Foreign investors were the dominant purchaser type across most Australian markets in 2011. However, we are now seeing increased interest for core properties from a range of other investor types, including re-capitalised A-REITS, superannuation funds moving into direct property, and syndicates.

We have identified 28 domestic and offshore wholesale funds and REITs who are looking to place at least A$20 billion immediately into Australian property. This estimate does not include private investors, either directly or via syndicates, which we also estimate consider are seeing to be having considerable growth, particularly for secondary assets.

According to Colliers International research, Asian investors made up 35 per cent of foreign investment in Australian property in Q3 2012. While we are seeing strong demand from global investors, and Singapore and Hong Kong-based groups, we are seeing more and more interest directly from China. Given China is Australia’s major trading partner, we expect this level of interest and investment to increase significantly over the years ahead.

Transaction levels for Australian CBD office buildings in the first half of 2012 are well up on the same time period for the previous two years. In the first half of 2012, total volume amounted to A$2.2billion, compared to A$1.5 billion for the same period in 2011 and A$1.3billion in 2010.

Over the past six months, transaction levels have been the highest in the Sydney CBD, followed by Canberra and then Melbourne CBD.

In responding to the 2012 Colliers International Global Investor Sentiment Survey, 70 per cent of Asian investors indicated they would expand or increase their level of investment over the next six months.

I witnessed firsthand the broad depth of this demand for Australian real estate on a recent visit to Asia. We met more than 30 clients over four days and every single group has a current investment requirement for Australia. Some of the groups, such as CPPIB and GIC, already have major investments in Australia, while others have yet to make their first foray.

The interest ranges from major private equity firms seeking opportunistic returns through distress or development, through to major pension funds looking for prime assets in core markets.

While I received some questions around on the changing dynamics within the mining and resources sector, the demand is still strong. If anything, the slowing mining boom will bring greater focus back to Sydney and Melbourne.

We continue to see new groups every month contacting or visiting us, wanting to understand our markets better. In recent times, we have seen greater interest from Japan, South Korea and North America.

Our 2012 Colliers International Global Investor Sentiment Survey found the biggest concern for Asian investors was the ability to raise equity, with 30 per cent of respondents indicating this was the greatest impediment to their investment decisions.Fifty-five per cent of Asian respondents indicated a willingness to take some moderate risks over the last six months, and 53 per cent said they were likely to take more risk in the coming six months.